Related papers: Brownian Bridges on Random Intervals
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
This paper characterizes the probability of a market failure defined as the default of two or more globally systemically important banks (G-SIBs) in a small interval of time. The default probabilities of the G-SIBs are correlated through…
Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…
We consider data losses in a single node of a packet-switched Internet-like network. We employ two distinct models, one with discrete and the other with continuous one-dimensional random walks, representing the state of a queue in a router.…
Abrupt shifts in ecosystems, brains, markets, and climate are often diagnosed as signs of approaching a tipping point, i.e. a critical bifurcation where stability is lost. Here we reveal a broader and more deceptive mechanism:…
We extend the Markov additive methodology developed in [Ann. Appl. Probab. 9 (1999) 110-145, Ann. Appl. Probab. 11 (2001) 596-607] to obtain the sharp asymptotics of the steady state probability of a queueing network when one of the nodes…
This paper considers a sequence of discrete-time random walk markets with a safe and a single risky investment opportunity, and gives conditions for the existence of arbitrages or free lunches with vanishing risk, of the form of waiting to…
In competitive industries, a reliable yield forecasting is a prime factor to accurately determine the production costs and therefore ensure profitability. Indeed, quantifying the risks long before the effective manufacturing process enables…
The probability of default (PD) estimation is an important process for financial institutions. The difficulty of the estimation depends on the correlations between borrowers. In this paper, we introduce a hierarchical Bayesian estimation…
A latent internal process describes the state of some system, e.g. the social tension in a political conflict, the strength of an industrial component or the health status of a person. When this process reaches a predefined threshold, the…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…
We introduce a continuum model describing data losses in a single node of a packet-switched network (like the Internet) which preserves the discrete nature of the data loss process. {\em By construction}, the model has critical behavior…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
Empirical estimation of critical points at which complex systems abruptly flip from one state to another is among the remaining challenges in network science. However, due to the stochastic nature of critical transitions it is widely…
Consider the motion of a Brownian particle in two or more dimensions, whose coordinate processes are standard Brownian motions with zero drift initially, and then at some random/unobservable time, one of the coordinate processes gets a…
A stochastic flow of homeomorphisms of the real line previously studied by Bass and Burdzy is shown to arise in describing a Brownian motion conditional on knowing its local times on hitting a fixed level. This makes it possible to connect…
Traders and investors involved in an option contract having the underlying stock in range bound are likely to lose their initial investment. Timing in buying an option contract is of capital importance. In a recent article [1] the…
A dynamical system that undergoes a supercritical Hopf's bifurcation is perturbed by a multiplicative Brownian motion that scales with a small parameter $\epsilon$. The random fluctuations of the system at the critical point are studied…